Abstract:U.S. trade officials and northern-tier wheat producers have long expressed
concerns that Canadian wheat trading practices — both import and export — are
inconsistent with Canada’s international trade obligations. Canada maintains that its
import practices and the Canadian Wheat Board (CWB) wheat export practices
comply fully with international trade rules and its WTO obligations, and that Canada
does not subsidize its wheat exports. In addition, U.S. millers and pasta makers have
expressed concern over potential trade restrictions that might limit their access to
Canada’s high-quality grain supplies.

U.S. allegations against Canadian wheat trading practices have led to a series
of investigations by U.S. agriculture and trade authorities at various levels —
including both the U.S. International Trade Commission (ITC) and the World Trade
Organization (WTO) — against wheat imports from Canada, as well as the trading
practices of the CWB.

ITC investigatory findings (October 2003) resulted in an 11.4% punitive duty
— including both antidumping (AD) and countervailing (CV) duty components —
on Canadian hard red spring (HRS) wheat upon entry into the United States. Canada
appealed the ITC’s positive injury finding against Canadian HRS within the NAFTA
dispute settlement framework. On March 10, 2005, a NAFTA panel reviewing the
ITC findings recommended removal of the AD portion of the punitive duty. On
June 7, 2005, the NAFTA panel ordered the ITC to revisit its material injury findings.
In October 2005 the ITC, pursuant to the NAFTA panel’s review remand, reversed
its earlier finding and issued a new determination that there was no injury or threat
of injury. This decision was upheld on appeal to the NAFTA panel by the North
Dakota Wheat Commission, and both the AD and CV duties were removed in March
2006. As a result, Canadian durum and HRS may freely enter U.S. markets.

At the WTO, a dispute settlement panel ruled (April 4, 2004) that the CWB’s
trading practices do not violate WTO rules for STEs; however, the panel found that
certain Canadian grain marketing practices were not in compliance with WTO rules.
As a result, Canada passed legislation (May 19, 2005) that rectified its grain import
and marketing system practices (effective August 1, 2005) to bring them into
compliance with the WTO panel’s recommendations.

The WTO panel’s ruling in favor of the CWB was upheld on appeal by the
United States. However, the United States continues to pursue greater regulation of
the CWB through the ongoing WTO trade negotiations that seek stronger disciplines
on state trading enterprises. This report will be updated as events warrant.